United States: Retail sales soften slightly in June
July 16, 2018
Retail sales expanded 0.5% month-on-month in June, easing from May’s robust, upwardly-revised 1.3% print (previously reported: +0.8% month-on-month) and in line with market expectations. The figure caps off a strong second quarter of consumer spending, signaling economic momentum gained traction from the previous quarter.
The report from the Department of Commerce showed results across sectors were mixed in June. Motor vehicle sales posted another strong performance, expanding 0.9% on a month-on-month basis, from a revised 0.8% increase in May (previously reported: +0.5% mom). Moreover, health and personal care store sales growth accelerated to 2.2% (May: +1.3% mom). Non-store retailer sales, which includes online retail, also picked up (June: +1.3% mom; May: +0.4% mom). Brick-and-mortar department stores sales, however, fell 1.8% (May: +1.4% mom). Meanwhile, electronics and appliance stores, food and beverage stores, and clothing and accessories stores all reported lower sales in June.
Excluding automobiles and gas, retail sales grew 0.3% in June, slowing from May’s revised 1.3% increase (previously reported: +0.8% mom) and missing market expectations of 0.5% growth.
In annual terms, growth in retail sales soared to 6.6% in June, the strongest print in over six years, and up from the revised 6.5% increase in May (previously reported: +5.9% year-on-year). Annual average retail sales growth climbed to 5.1% in June from 4.8% in May.
All told, June’s figure and May’s revised gains are consistent with a pick-up in private consumption in the second quarter. Retail sales data can be volatile, so five consecutive expansions highlights strong consumer dynamics, thanks notably to a robust labor market. Whether households keep spending at the pace seen in recent months in H2, however, will partly hinge on developments in current trade tensions. This could weigh on consumer confidence and feed through to higher prices, particularly if the U.S. administration decides to impose tariffs on an additional USD 200 billion of Chinese goods as it has recently threatened. Indeed, the list of products targeted by these new tariffs, unveiled on 10 July, would include staple household purchases such as clothing, appliances and food products, which would have a larger impact on consumers’ purchasing power.
U.S. Private Consumption Forecast
FocusEconomics Consensus Forecast panelists expect private consumption to grow 2.6% in 2018, which is unchanged from last month’s forecast. For 2019, the panel sees private consumption increasing 2.4%.